403b Plans

What are 403b plans?

403b plans are employer retirement plan accounts available for certain organizations that are tax exempt under section 501(c)(3), similar organizations exempt from tax under section 501(a), and public education institutions.

These organizations generally include schools, churches and hospitals.

How do 403b retirement plans function? What are the 403b contribution limits including catch up contributions?

Basically, they are salary reduction plans, similar to 401k plans, limited to $13,000 in contributions in 2004.

The salary deferral amount increases by $1,000 each year until 2006, when it reaches $15,000.

The contribution limit will be indexed for inflation beginning in 2007.

Employers are allowed to, but are not required to, make matching contributions.

403b and 401k Catch Up Contributions For Age 50 Or Older

For 2004, individuals, age 50 or older, may also make an additional 403b or 401k catch up contribution of $3,000.

This 403b or 401k catch up contribution provision increases by $1,000 per year until 2006, when it reaches $5,000. It will then be adjusted for inflation starting in 2007.

Catch Up Contributions - 15-Year Rule

In addition to the age 50 or older 403b or 401k catch up contribution, an eligible employee with at least 15 years of service may contribute an additional elective deferral amount not to exceed $3,000 per year.

The employee must contact his/her tax advisor and human resource manager in order to determine if he/she is eligible for this 15-year 403b or 401k catch up contribution.

An individual plan might legally decide to lower the maximum salary deferral limits or limit the percentage of contribution and/or not allow for the 403b or 401k catch up contributions provisions.

Each employee should check with his/her own plan administrator to determine his or her eligible contribution limitations.

• 403b Rollover
• Federal Tax Withholding
• Mandatory Withdrawal 403b Plan 
• 90-24 Transfer